International audienceWe examine short-term investor reaction to extreme events in the UK equity market for the period 1989 to 2004 and find that the market reaction to shocks for large capitalization stock portfolios is consistent with the Efficient Market Hypothesis, i.e. all information appears to be incorporated in prices on the same day. However, for medium and small capitalization stock portfolios our results indicate significant underreaction to both positive and negative shocks for many days subsequent to a shock. Furthermore, the underreaction is not explained by risk factors (e.g. Fama and French, 1996) calendar effects, bid-ask biases or unique global financial crises
This study empirically investigates whether stock market volatility increased following financial liberalization, in six 'emerging' markets. The sample countries are Argentina, India, Pakistan, Philippines, South Korea and Taiwan. To examine the issue, the news impact curves are utilized which relate current volatility to past news. The news impact curves are derived from the parameters of EGARCH models which measure the conditional volatility of stock returns in the sample markets. The results suggest that volatility fell after important liberalization policies were implemented.
We examine the significance of the size, book-to-market and momentum risk factors in explaining portfolio returns in the Australian stock market. We compare the CAPM to a four-factor model assuming static risk premia, and find that the additional factors have significant explanatory power. Under the assumption of time-varying factor loadings, though, the significance of the three additional factors becomes marginal, which suggests that size, book-to-market and momentum may proxy for misspecified market risk.
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